e car. then why settle for slow internet? comcast business. built for speed. built for business. guy: welcome to bloomberg markets, the european open. we have your first trade of the day. matt miller is off today. let's talk about what is happening in the u.k. with brexit yet to have any real impact on the data, why should hammond deliver more stimulus? trump in transition. the president-elect tempers some of his more extreme views but he

is said to be looking at reshaping the press and doing it fast. who is in line to fill those vacant seats on the fomc? big question. industrial surged but so does volatility. the sector only for those with reserve.y let's talk about where we expect the european open to go. let's show you what is happening in terms of the fair value. dax wasthe up. open.l get a flattish we are seeing the dollar index is retreating a little bit. draw youring, we will attention. iron ore up by 7.3%. that is coming back and coming

back fairly strongly. it is down to speculative money, is there a trump effect? we will kick that around later in the show. let's get caught up on what you need to know. thank you. opec talks in vienna yesterday did not resolve whether iraq and iran will join any production cuts. the matter has been deferred to ministers who will make -- meet next wednesday according to delegates. run oning questions production do not make a deal impossible next week. the lack of agreement lays open the possibility that the group will fail to implement in late september. generale plans to exit its less profitable businesses to increase efficiency, improve capital allocations and mitigate risks. they aim to generate one billion euros and lower costs by 200 in its mark -- euros

mature markets by 2019. the ceo spoke to francine lacqua. >> we do not announce to not at least.did what we said is we reduced since march our headcount by 1500 people. that is thanks to these transformation programs. we pay some attention to headcount and transportation costs. juliette: other customers are poised to keep as much as $2 billion. that is after the u.s. bankruptcy judge is out of reach. coke industries and other defendants argued the prophet

was beyond to u.s. jurisdiction because it had been transferred from offshore feeder funds to 2008gn banks before the arrest. facebook is keen to enter china, it has created a tool to censor information according to the new york times. china blocked facebook in 2009. the social network could return given restrictions and other regulations that favor locally owned companies. facebook had not made any decision on its approach to the country. they declined to comment on the report. open news to me for hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. hammond gets his chance to change policy in the wake of the brexit vote.

with public finances forecast to deteriorate sharply over the coming year as brexit takes its toll, we will discuss that, hammond has little room for big fiscal giveaways. we will be in westminster monitoring enrollments as the chancellor's speech kicks off around 12:30 p.m. u.k. time . the u.k. business secretary gregg clark. let's talk about what the chancellor needs to deliver. our guest joins me now on set. to does the chancellor need do anything today? the u.k. economy is in great shape. it is in imf sure great shape, it has a lot of structural weaknesses and the impact of brexit is yet to be felt but there is a good case for saying the best the

chancellor can do in pure at -- macroeconomic terms is to wait and see. guy: are you surprised that this is where we are? jonathan: i would have expected to see more of an impact in the , so didata from brexit most economists and i think we got it wrong. short-term forecasts are uncertain. the consensus of almost all economists is still very much over the medium to long term, we can be reasonably certain a brexit will have a significant impact and that indeed is what the kobe are is certain to say today and that is what underlies the forecast. it has not happened yet. the case for the chancellor taking action to counter economic weakness which has not shown up yet is in fact pretty weak. guy: you made this same case for the governor of the bank of england. he moved to swiftly. >> he did but to be fair, he

said that was an insurance policy against things going wrong. guy: why would the chancellor not do the same thing? jonathan: fiscal stimulus is slow to kick on an hard to reverse. monetary policy is for something like this. guy: if we have learned anything from donald trump, he makes these kinds of announcements and say you will build roads and president -- bridges and financial market surges and you get the animal spirit returning. think there is a good case in the u.k. for quite a lot more public investment. the previous chancellor george osborne added sharply in 2010 and it never recovered. ofhave got the deficit infrastructure and that is where we have been running down the country's accent. it is not because the economy in the short-term needs a stimulus. it is because we have been under investing. guy: let's talk about what the bill is going to be for brexit. you say the data at this point

are not showing us any significant deterioration. there is an expectation of the deficit will become more of a problem going forward. that is the projection in blue and the independent forecast in billions of pounds. is there an opportunity to go now when there will not be down the road? jonathan: i'd do not think we should get too worried about these projections. they are very uncertain. the obr will be the first to say that their predictions are a guess at best. the debt to gdp ratio will even under these new projections still be pretty much stable at a level which we should not be worried about. there is room for maneuver. it is better to say there is for whenave the room we need it which is probably is not now. guy: the construction sector is calling for a big change in planning restrictions and that seems like an area that does not

cost free much. but could potentially deliver quite a lot. should we be thinking about what policy can do in terms of non-monetary effects rather than monetary, fiscal effects? jonathan: absolutely. andu.k.'s planning system the failure to build enough houses is a big structural problem which is not entirely or even mostly about lack of money. lack ofout things like restriction. the previous chancellor completely failed to deliver some of the promises on house building. there are some encouraging signs administration is taking housebuilding much more seriously and that is a good thing. this chart shows you the u.k. lagging as you made the point in terms of construction spending. i want to come back to what we have seen. heathrow, they,

have already made the announcements, we have got the infrastructure coming. jonathan: all those things, those are probably not by any means the best value for money projects as the government can invest in. we know the story about hinckley points and heathrow will take a long time. it is probably the right thing but not this year. who knows when. whereas what the u.k. economy could really use from the point of view of ordinary people is lots more houses as quickly as possible. that is something the government could do something about if it had the political will. is theremuch pressure from above from the prime minister to help with wages and help with the tax policy this comes toose, the trump story and it is kind of familiar to those who follow brexit and those who have been left behind. how much room is there to help

this people? jonathan: there is a lot of room. under the osborne plans there was going to be large cuts in but what will become universal credit which hits lower income working families hardest. he was going to use that money to finance an increase in the personal tax allowance, the vast majority of which goes to people who were relatively better off. quite a large transfer of wealth from the more disadvantaged to the better off. what we will see as the government will smooth the edges off that. it will smooth the edges off the universal credit cuts but there will be very large cuts. the government could've it wanted to go quite a lot further to help what has been called the just about managing for families. guy: we'll talk about brexit. you are watching the open coming up. trump versus the fed. he is ready to make changes in the makeup of the central bank. to do so quickly shortly after

taking office, there are two fomc.vacant on the we will speak to the ceo of nl. to selltting costs assets. they are investing heavily in the u.s. we'll see how the ceo of italian feels about the election. this is bloomberg. ♪

guy: we have 50 minutes to go before the market open. bloomberg business flash. juliette: trans asia shares fell by the daily limits after the airline was forced to shut down. pays asia says it cannot notes due next week. it is rejecting closure and will fight the plan. taiwan cooperative bank is reported to be calling other creditor banks to discuss counterproposals. the first three quarters of this year, the company lost almost 70 million u.s. dollars. the future does not look any better. after much consideration, the board has made the painful decision to dissolve the airline. juliette: lufthansa will cancel .lmost 900 flights today

disrupting travel for 100,000 people. strike overpilot pay was dismissed by a frankfurt labour court. premium services such as beijing to frankfurt and los angeles to munich are among those wiped out. monsanto is being sued on behalf of shareholders over claims its chief executive and board members stand to him properly profit from a planned acquisition by bayer. they have wood held -- withheld information from shareholders. the company says the charges are without merit. the company said it is scrutinizing breitbart after donald trump named its former chairman as chief white house strategist. it decided the publication had contenta policy against

inciting violence. the ceo said in an email statement that the company "had always and continued to condemn racism and bigotry in any form." that is your bloomberg business flash. guy: eu leaders have intensified calls for a clear brexit strategy from the u.k. government. the member of parliament demanded clear -- they produce clear proposals. unfortunately received no new insight into how the government pictures brexit. there is no idea what brexit really needs. two heads of state have made comments with the belgian prime minister calling for an intelligent brexit. and the slow back prime ministers saying i am not sure whether the u.k. knows what it wants. still with us, jonathan porter. surprised the data has held up in the way it has

and if so, why do you think that has happened? jonathan: what has happened is the impact of uncertainty which was expected to depress consumer and business [indiscernible] initial shock to what people thought and the market share. after a while, people shrugged their shoulders and said nothing has happened yet, we are not sure what will happen and when. maybe we should be worried but meanwhile, we are not going to change what we do. we are going to get on business as usual and that is what we have seen, business as usual. the dollar.d be how big an impact is sterling having because we have a really cheap currency. jonathan: we have not seen big positive or negative effects from sterling. we have neither seen this wonderful export boom as we did in 1992 when we devalued last. export boomseen the

but equally we have not seen the rise in import prices bleeding through into inflation in the shops more than a little bit yet. both of those impacts, positive and negatives, are still to come. the worry is that many predictions are that consumer confidence and hence, spending will start to fall early next year as the impact of the devaluation feeds through into prices. guy: it is hard to judge what is going on inside the halls of power but there seems to be a growing sense that the yuki government does not understand what brexit means. you wonder as we approach this deadline that theresa may has , setting aside what is happening with the courts. we are getting to the period where uncertainty will grow. jonathan: civil servants have been working hard trying to come

up with what they think, what may be a vaguely sensible, credible plan for brexit. they are doing their best but they have also decided it is not viable to do that by the time [indiscernible] and you have heard a bit of whispering about this in the past week or two that the fallback plan is to go to the european union and say, will be, i hard brexit so painful maybe we just have some sort of transitional, extended, not two years but three years, five years, seven years or something like that. that will be a difficult sell, but it might be in the best interest of everybody. that create more uncertainty or less uncertainty because in some ways it damps down the volatility. jonathan: there is a persistently low level of uncertainty for a long period. but if not -- if nothing bad

really happens that is the possibility of a hard brexit. guy: thank you for your insight. jonathan porter. we are nine minutes away from the european open. we will look at some of today's movers including lufthansa. 900 flights had to be canceled. will this affect the stock or is it begin? that is next. this is bloomberg. ♪

guy: 7:53 a.m. in london, 2:53 a.m. in new york city, we are minutes away from the european cash open. let's talk about the stocks we are focusing on this morning. francine lacqua talked to the business of generale. the strategy seems to be to get rid of the less profitable businesses and focus on costs. it is a competitive place right now, that is the share price see,the last, as you can down by around 4%. the new bus coming in, we will see changes. let's talk about what else we are watching. lufthansa, a much bigger and more aggressive number. big problemsansa,

today. nearly 900 flights are being canceled, that is a huge number of people being affected and this is an ongoing problem which is in some ways baked into the stock already. it's ongoing problem with what is happening with the pilots and the ongoing strike. the stock bounced back is late. the way it has been benefiting from what is happening, a better story generated especially on some of the long haul flights. down by around 12%. the other stock, thomas cook. is restarting the dividend which is great news. in terms of the overall outlook, still reasonably tepid. cautious as the language that is used by thomas cook. this is the one year down by 28% on that period over the one year. european markets are positive, we are trading up by around .5 of 1% in terms of the fair value calculation we are at right now as you can see. 50, you may see a

bit of a pickup in the miners, iron ore in particular has rocketed overnight in asia and you may see that being priced into some of these stocks. today and yesterday as well. the market open is mixed. this is bloomberg. ♪

guy: you are watching "bloomberg markets: the european open." we are moments away from the start of european trading. what do you need to know? any brexit yet to have real impact, why should chancellor philip hammond deliver more stimulus? trump in transition. someresident-elect tempers of his extreme views, but he is looking at reshaping the fed. who is in line to fill the vacancies at the fomc? surgements quantities overnight.

right, the european markets are just getting set to open. we are anticipating we will see a positive start. it looks like london will outperform. the gilt market will be interesting today. let me take you to my terminal and show you where this open is taking us as the market makers get their prices set. we are expecting a positive start from london. open aexpected to positively. germany is expected to open up reasonably flat. we are watching lufthansa today very carefully. london is open and cac is open, less than .1%. we are getting french pmi data, which looks pretty much better-than-expected at 52.6. the number of 52.3 is also better than the expected 50.9.

the french economy always seems to be two steps forward and one step back. on whatal with the data is happening surrounding this market. yousef: i have got all the details for you. let's go to the 10 year gilt. we are looking at an increase of two phases points. a lot of questions about what the autumn statement will look like. let me take you quickly as well and show you what is happening in the equities space. this is the imap function. it lays that which industry groups are on the move. materials are up .6%. real estate is up .3%. the laggards are the financials and i.t. stocks. the commodity story is a story of two cities with increases in the metals space and weakness in the oil space. we can see tremendous volatility ahead of the november 30 meeting

for opec. this chart shows you what has been happening during the last 48 hours. you can see pessimism with questions around iran and iraq pushing the oil price to around $48. for bent, about $40 prevail. peror brent, about $40 barrel. goldman sachs is changing its rating. the banks says skies are clearing and this is all about the delivering of cost-cutting. we are also watching lufthansa, the ongoing lockout extended to thursday after ongoing efforts stock.k the they are struggling to find common ground in the negotiations. guy: thank you. i want to show you one of these

stocks before we talk about donald trump. story, kind of a related but it is also a china story. this is bhp, in terms of the london listing. we have seen another gap higher this morning, this is what is happening surrounding iron ore. it did retreat a little bit post the election. that is the election there. we are now beginning to climb back as well. i will show you the one your chart on this because it is incredibly impressive. that is the one year chart. to get that kind of hr, you have to have this kind of a cell of. -- to get that kind of a chart , you have to have this kind of a sell off. donald trump is apparently taking the fight to the fed. this story is taking another turn. forces are suggesting the president-elect will move fast within the first three months of office to fill two vacancies on the fed's board of governors. trump took many shots at janet

yellen during the campaign. this comes as the billionaire signals he has no problem prosecuting hillary clinton over her use of a privacy mail server. -- her use of a private email server. james. us now is rallying ands are bought markets have sold off. are we reaching oversold and over but positions on both of those? >> this depends on how you think the agenda will play out. if you were to boil down what we believe is going on, we are likely to see significant fiscal expansion. therefore, more inflation. that is clearly a proactive agenda relative to bonds. is inevitably -- it is inevitably bad news. this seems to be a very

tightly focused rally, though, which is why the dow has done so well. we need other sectors to get going. >> it has been a really noisy year. noise has been extraordinary. i think we will see more of that. there is wide uncertainty as to which sectors are the winners and losers on the back of the trump agenda. there will be a global mention to all of this because while mr. trump is pursuing policies he thinks will be good for the domestic economy, many of the larger companies have international earnings and there i not a great deal of clarity as to what that would mean. guy: these are the sectors that have been doing well. gold has done very well. 13%.ld is up guy: this is only one month basis, a complete flip around.

the industrial metals have done well. health care, completely rotated out. so, really ambitious, big rotations going on. >> and we will see more of this in 2017. guy: so, how do i play a market that is rotating aggressively at the sector level? >> you have to decide if you are focused on long-term returns or short-term movements? you have to watch the screens like a hawk and trade aggressively because they will be a lot of rotation. if you are worried about long-term returns in value, the key is to work out which companies are likely to deliver long-term returns. mi think the investors will be rewarded. should think that you buy value if you are not going to get any growth.

the main thing that is important today is quality growth within an acceptable price. if you said to me, should i worry about inflation? for sure. i think we have a 12 month upturn in inflation numbers. but i think the longer term risks remains deflation. we still have overcapacity and declining command within shifting demographics. that is not an environment where we will likely see companies push up prices simply because of excess demand. guy: we don't really know what donald trump is going to do. knew what hisan we agenda was while he was electioneering. guy: but now he is going to have the power. >> you have to give in mind, the checks and balances in the u.s. system, even when the republicans own the turf, that does that mean he has free reign. many people within the republican party itself will say, mr. trump, you

can do this. guy: there is a lot of concern going on within dodd-frank. that maybe a step too far, in as much as dodd-frank is a key centerpiece of legislation as having been stabilizing? >> i think they will be a replacement piece of legislation. i think we will have to wait a long time. that said, the u.s. financials have represented an excellent opportunity for the markets. the u.s. banks squarely to the table to sort out their problems t -- the u.s. thanks were early to the table to sort out their problems. were early banks to the table to sort out their problems.

my big question is, to what extent do customers feel significantly riled after the wells fargo issue? guy: james is going to stay with us, regarding what is happening more broadly in terms of the u.s. investment story. volatility on the eurostoxx 600 is in decline. on chancellor philip hammond. how many clues we are going to get on what the government intends to do with the economy as a navigates its way through brexit. as we were talking to jonathan portes earlier on, doing nothing might be the sensible thing. and iron ore, are you brave enough to get in on the metals market? we will discuss volatility within the metals sector, and how it is surging. all of that is coming up. this is bloomberg. ♪

guy: 10 minutes past the hour. welcome back. let's talk about where the markets are right now. this is the grr function. this is the stoxx 600. over the last few days, basic resources have been moving upwards. we did see a decent reality post the election. over the last few days, basic resources have been moving higher. we are of .8% today. -- we are up .8% today.

insurance financials are the big losers today. the banks are down .7%. let's get you caught up on what you need to know with the bloomberg first word news. reporter: opec talks in vienna yesterday did not result whether iraq or iran would withdraw production cuts. this is according to two delegates. a deal is not impossible next week, but the lack of agreement leaves the possibility the group will fail to implement the cuts first outlined in late september. biggest insurer aims to generate one billion euros and lower operating costs by one billion euros. 'se euro spoke to bloomberg

francine lacqua. >> the job cuts might hit the thousands. are we said is that we reducing our headcount by 1500 people. that is thanks to the local transformation programs. we going to increase the productivity. obviously, we have to pay attention to compensation costs. dozens made off customers as much as $2 billion that they gleaned from the security transactions. that is after a u.s. bankruptcy judge ruled the catch is out of reach for victims. coke industries argued -- koch industries argued it was out of jurisdiction in the years before december of 2008. global news 24 hours a day,

powered by 2600 journalists and analysts in more than 120 countries around the world. this is bloomberg. guy: thank you. i want to show you this chart. the company announced plans to buy back shares, sell assets, and cut costs. we are now joined by the company's ceo. so, you are completely repositioning the business and focusing on digital toys ization. you are a huge agency. internally, how big a shift is this? >> this is a big shift in terms of investment. it is 85% on hardware and 15% on software and applications. i think we need to digitize the hardware first for the plant to to start.

we are talking billions and billions of assets. you can imagine there is a lot in terms ofon digital. with present technology, you can retrofit digitalization in those ancient plans and give them a completely different look. guy: how much does it cost to do that? >> 5 billion euros over three ye ars. this will fully digitized the metrics. .e will add digital devices obviously, everything from now on in the investment scenario will be fully digitized. so, new investments will already be born like that. but the funny thing is you can digitize old stuff and give them new life, better performance, completely different outlook.

this is kind of knew because and technology allows -- this is kind of new because technology allows you to do this now. guy: in some ways, that is an easy decision to make because the technology is here and you want to make that change. how hard is it to make decisions on generated capacity now, when we seem to be at a tipping point in the many technologies? >> it is very hard and need to have a very detached view of the assets you have. you need to do this examination on a yearly basis on all the assets worldwide and decide, is this facility able to generate profitable energy in the next five years? don't go further than five because five is a lot. , but if ther is yes answer is mabye, is it worth

it? if the answer is no, don't think again. shut it down. that is what we are doing. we are sitting down half of generating fleet in italy. it is going off-line and we are almost finished with that. we're moving people to other things. we are taking these plants out. that cuts real cost. ney,you lose mabye mo that's what i call it. guy: let's talk about the united states, where you have invested heavily as of late. when you saw the election of donald trump, did you go back and look at your spreadsheets and say, things will change and we need to rethink the way we will invest? he is talking about coal. he is slightly changing his views on global warming. but nevertheless, he is a step back, not a step forward, some

with a. >-- not a step forward, some would say. >> look, we did this before the election and we concluded there was not really much to change. most of our investments i would say in the last four years, all of our investments went to the core republican states of the usa. so, midwest is where we are investing. guy: so, that was not by accident? of thethe governors states, they like to business and they see the influence of , and they see the jobs that are generated. there is nothing wrong with that. we concluded, and we are not the only ones, basically the sector concluded that it is basically about coal and gas, one versus the other. my they said, five years is a

big horizon -- like i said, five years is a big horizon. this time, there is nothing to worry about. the industry is not changing its course. so, i do not see any change for us. i think if you look at coal, i think coal is being displaced in the u.s. by gas. that will have to become coped with. i think it is a market driven farce. -- market driven force. i think this president has no ideology. guy: well, he has talked about coal. >> when you need to be elected, you say many things. then, you look at what is actually good for the country. and i think if he does that, we

will find out that the u.s., the producing twice the that, we will find out that the country is already -- look, if you lo ok at the oil they produced eight years ago, 40% more gas. the bill of the average american is at record lows since the 1990's. they are doing pretty well. guy: one quick question on the referendum in italy. how concerned are you that that will change the political trajectory in that country? >> i think if the referendum says yes, the view is yes, that is a big reform and other reforms are coming. so, italy is continuing to reform, good. if the answer is no, the path of italy is toiling. so, a problem is spreading. and here we go again. toee no risk of going

elections in italy any time soon. it is more about the perception that italy gives to the world that it will continue to inform and improve to become a modern power or not. guy: thank you very much, francesco starace. congratulations on your share price is i yesterday morning. francesco starace, the ceo of enel. coming up, the upcoming elections in europe and the italian referendum are having an impact on how companies plan for the future. we will discuss that next and carry on the conversation. stay with us. this is bloomberg. ♪

guy: welcome back to the open. i need to show you a couple of charts, and then we will talk about a few things. this is target two and the and balances that exist. this chart here is what is happening in terms of political risk. that is the political risk index from bnp paribas. armie underpricing political risk in europe -- are we underpricing political risk in europe? and is italy the focus? >> i am confident they will be another existential crisis to the euro.

commentatorsy talking about the italian referendum as a trigger point. but actually, the referendum is about the italian constitution. i think it would be good because it would break this balanced house problem that italy has that makes it difficult for them to reach decisions. mr. renzi remains in charge of the largest political party. and they will not be a political general election for 2018. there is not even a vote on the euro. guy: across the channel, we are very good at picking each other's unsustainabilities. we can see the euro is unsustainable. do you share that view? >> it is not sustainable as it is currently structured. if you were to say to me, what would be required to make sure the euro lasts, it would be the

fiscal policy. guy: james, stay with us. we will carry on this conversation. this is the european open, 26 minutes into trade. ♪

guy: welcome back. you are watching "bloomberg markets: the european open." thisis developing at point. we can see a performers within the mining sector once again. sterling is a little weaker this morning. we are outperforming in london. the rest of the continent is up by .2%. the u.k. chancellor philip hammond will get his first chance today to change policy in the wake of the brexit vote. 1.4 billion pounds will be pledged to build affordable homes. the affordable costs are

expected to deteriorate as brexit takes its toll. in theory, philip hammond has little room for big fiscal giveaways. still with us. in so many ways, the chancellor should do virtually nothing today. >> brexit has yet to show up in the economic data. the bank of england has only taken some insurance out for the british economy. why should the chancellor do the same? >> the chancellor's problems would be far less if we had better economic growth. he will want to put in place policies that support growth. so, the proliferation of broadband is a very simple example, just to facilitate business growth. this has got to be something that he sets as important. as well as a long-term commitment to education. guy: these are not sort of

massive changes. these are not trump-esque changes. >> and as we would recognize, the capacity of many of these projects to be bale able to be implemented, given the lack of labor, is really very significant. if you said to me, when did we last have a crisis where we had lots of debt, difficult global positions, the napoleonic wars. we had the emancipation of private capital. we built an empire. that will be one of the things calling to mr. trump as he tried to make america great again. guy: james will stay with us. anna has made her way down to westminster and now joins us with a guest. over to you.

anna: very pleased to say i am joined here outside westminster, where the chancellor will be making his speech at 12:30. the shadow economic secretary for the treasury, jonathan, great to have you on the program today. we were just talking about how maybe they will not be any big changes to the budget because of the constraints to the economy at the moment, but the chancellor says he wants the economy to be much more fit for brexit. what are you expecting? >> that would be lovely. if the economy was a football, we would still be on the pitch. what we want today is a plan for 's future.n what about a plan for the future of prosperity? how are we going to get investment higher question mark and how can we make sure everyone plays a part in that?

it looks like they will still go ahead. it is just about managing the risks. at the same time, we are not going to have the kind of overall rallies. anna: we will come to what he might do for the families managing in a moment. but regarding tackling productivity, will leave the anything materialize then? there are constraints related to the amount of borrowing he can do? what innovative ideas could the infrastructure and productivity moving? >> he will probably cite the constraints he is under. the last six years have brought about some of the constraints because it has been a long time since a chancellor for the exchequer of the conservative party has done this. what we really need is a way to get the country's investment

back up to where it belongs, back up to something akin to the average in the ecb. if it rises in percentage terms, it would be helpful. anna: would you think 3%? >> we want independent institutions to do that. if you do not tackle britain's investment problem, we will not the progress on the productivity challenge, the challenge of creating new and better paying jobs. we will not see that. and that of course, should be the priority. we would like to take investment spending out of the calculation. say, it is not about gimmicks. it is about a long-term framework. anna: even if borrowing costs are as low as they are at the moment, they have been rising a little bit since the election of president elect trump.

many investors might be concerned that if debt levels go much higher, the market is really precarious. others are saying interest rates are quite low. how much would you be borrowing as labor right now to invest in infrastructure? >> we want an independent international investment bank to make those decisions. you can just put a large figure and expect there to be no concerns. we expect the cost of borrowing to be extremely low. over the last six years, the kind of strategy seen so far has been very tenet of with austerity measures -- has been very punitive with austerity measures. you will end of borrowing to cover the costs of failure and that is what we will see today, a very large increase in the projections on borrowing. anna: it is a little bit westminster.n one of the implications is

around freedom of movement. we do not know what the implication is yet, but many conversations are yet to be have. you voted for remain, that you think we should move on and except that there will not be free movement. how will that affect those in the city? >> you are right to say that access is the number one problem people are talking about. of course, we need a comparative rate, unless you are addressing the challenges of the infrastructure. that will address the needs of businesses. when i talked to constituents who are unhappy with the movement process, they are not so much concerned about city institutions like banks and insurers. they are worried about the impact on the lower end of the labor market, and that is where the government could address that. so, there is room for change

there. anna: is labor ready to give up on freedom of movement? we hear some people want to keep pushing for that. >> will not prioritize immigration over the strength of the economy. you have got to get the economy down. that is the first priority. of course, what we heard from the government, the conservative conference about possibly making lists of foreign workers, that is the wrong way to go. there are legitimate concerns and let's see how we can address those within the negotiations. so, you think we should back away from those muted plans. thank you, jonathan reynolds. we wait, guy, to see what is in store. anna, thank you very much, indeed. as she says, jonathan reynolds.

angela merkel, the german chancellor, is speaking currently to german parliamentarians in terms of what she has been saying. she is concerned about the fact that many people are worried about the stability of our order. policymakers must confront the spread of news. she is addressing what is happening with the media and the populist surge at the moment. just in terms of what the data is saying out of germany, november's services pmi rose to 55 and the forecasted number was 54. so, the data, a little softer on the manufacturing front and a little better on the services front, but nevertheless, well north of 50. this is as the german economy continues to hum at 80's and level of the moment. angel-- come at a decent level at the moment -- hum at a decent

level of the moment. this as angela merkel continues to seek a fourth term. ♪

guy: welcome back. this is the open. let's talk about what is happening in egypt. the country is looking to raise $6 billion through global bond sales in 2070. -- in 2017. >> we were planning to do it by the end of november, but there has been volatility since the

election. maybe over the change in the philosophy over how the economy was run and the plan of the president-elect, there has been uncertainty in the market. we are still trying to do it maybe next week, but the window is closing because by the second week of december, the markets will be very quiet. so, it is either this, or maybe by mid-january. theow do i participate in future on the upside of egypt? thishad a bond market, if bond issuance goes well, how much will lease the next year? >> it depends on our financing leads and the development of basically, something like, how much investment will come into the country, either foreign investment or local investment.

we will come to the markets -- r $10 billion, o $10 ?illion question mark > $6 billion. billio guy: this is after president-elect donald trump took power. it has argue that maybe been battered a little bit. index ands the msci the dell index on the same screen. -- and the dollar index on the same screen. the dollar index goes up and the em index goes down rather sharply. we have seen a decent rally over the last few days coming through. that is not going to work for me, is it. yousef is still with us, as is

james bevan. yousef, we have seen emerging markets come back. is that because they have been oversold? or is that because there is a belief that donald trump will favor the emerging markets? >> it is definitely a little bit of both. increased spending from the u.s. could drop a lot of these countries' exports. this looks very appealing at these levels. the stronger dollar has weakened these currencies. look at what happened with the malaysian ringgit. this is the 11th straight day of losses. the central bank has had to hold off on raising rates. we see a very similar pattern across emerging markets. be it turkey or some of the others as well, basically it is struggling with a weaker currency. yes, it is positive for the exports, but it feeds into inflation as well. guy: commodities have gone up. how big a factor is that? there is an upside and a downside.

iron ore is up 8% overnight. is that a factor? >> absolutely. the rally is driving a lot of these commodities across the market phase. companies are jumping on that. now, on that point, it is not all positive. if you take a look at the emerging market bond space, it is a slightly different picture. if those were the kinds of assets investors were first to dump after the donald trump victory and again, even though some say this is a buying opportunity by historical standards, it is not really overdone at all. we are back to what, january levels? guy: let's go back to the start, which has decided not to work for me. so, let's not go back to this chart. for most of this year, fund managers have an tellinbeen telg me, you want to be in em? is there more reversal still to come?

as yousef said, we have not come that far. >> i think we should break the story into its component parts. this is still a case where emerging economies will offer premium growth for demographic challenges. so, emerging markets are going to be important. however, i would say there are a series of markets where we still have a lot of risk. i will take brazil as a case and point. i am looking at an economy that continues to look very troubled. i am thinking about the great companies in bral. terms of what i would want to the stock level, i

think you have to look for world-class companies. if you were to think about a broad definition of emerging markets, absolutely table of delivering ordinary terms on high dividend yield. samsung, i would say the recent weakness, the decline in sentiment, samsung is a long-term buy. those are the sorts of companies i think one should buy, avoiding the gold price. underway with us eve south africa. in europe, i would want to look at the banking sector because i see good quality cash flow. again, i would look at the stock selection. i absolutely look for the quality of the companies, strong balance sheet, sustainable growth, and the capacity to be in the global market. guy: em volatility,

currency-wise -- >> if you have a budgetary surplus -- you guy: if i had a turkish stopper now, how would i play it? >> i would look for a company that is producing across europe and i would definitely hedge the currency. yousef: we need to differentiate between the speculative enthusiasm between donald trump and the prospect of infrastructure investment. that is feeding into sentiment. but you also have the reality, which is that demand is being driven by china. that is pointed out in the goldman sachs notes this morning on iron ore. it is being driven by china and less in real terms by the rhetoric coming out of the u.s. you play that,pla do james? >> when i look at the material sectors at large, i want to be able to cover the market, i believe it is the most prudent

strategy. also, have to say on the way up. guy: but to come back to the point about china, the focus seems to be on what the united states is doing, rather than china. china is in the background right now. >> yousef is right to say the china numbers are important. china's growth profile is better than expected. they are the marginal deliver of economic growth to the global economy. their rate of growth is faster than the u.s. and there is an expectation that they will continue to drive demand for global commodities. however, they still have a significant overhang, in terms of productive capabilities. and they have a property bubble. do you believe the metals numbers? 8%ee an iron ore jump of

overnight. >> it is very clear this is highly speculative. guy: we will leave it there with james bevan. thank you for spending your precious time this morning. up next, we will carry on the conversation surrounding what is happening with the metals. investors, going back and forth between optimism and warnings. we will look at demand both in china and in the united states related to the president-elect donald trump. this is bloomberg. ♪

guy: let me take you to berlin and show you what is happening. angela merkel is speaking, currently talking about what the focus of the german g-20 presidency should be, talking about the fact that africa will be the focus. the chancellor says germany cannot reject globalization and isolate itself. there is a little bit of pop mania surrounding donald trump. we will monitor what she is saying. on the two political front , she says -- on the geopolitical front, she says it is very regrettable who russia is supporting. the commodity markets seem to be in focus for the markets. iron ore, particularly in focus. volatility has spiked sharply

with the commodities surging one day and tanking the next. iron ore advanced to a two ye ar high on november 11 and surged yesterday. let me show you this chart. this is the kind of idea we are talking about right now. i can run you through this on my bloomberg. you can see the open interest, which is interesting, declining. the us we see a surge coming through. thisis, as we see surge coming through. we rallied quite sharply after donald trump's victory. we then faded quite sharply. lynn's take on what is happening. is this speculative? >> i think a lot of it is speculative. there is a lot of speculation

coming on board. the consensus is that we are due for a short-term correction. it might not be a crash. guy: what about in terms of what happens next? >> if you look at what people are saying, prices are around $75 a ton. a letter people say it will be the next55 and $75 in year. it will not be a return to the levels that we were at at the beginning of the year. guy: if you look at the reinforced steel chart, it went parabolic and went down again. is it the same kind of money chasing the same story? >> it is the same kind of story. across commodities this week you have seen an upswing in copper, zinc, oil. everything is coming back to life. you have got the opec deal, which is quite bullish, the infrastructure, china's economy. in a real sense, there is a

lot of excitement around commodities that you did not see last year. guy: even goldman sachs is getting excited. lynn thompson, joining us on the commodity story. up next, jon ferro and i are on the radio. ♪

growth, fasterr inflation, and more debt, that is the first forecast. trump -- the president-elect will look to fill two vacancies on the board of governors. yellen?utweigh european equities advanced after u.s.